JUDGMENT OF 19.4.1983 — CASE 113/83 COMMISSION v GERMANY
In Case 113/82
THE COURT composed of: J. Mertens de Wilmars, President, P. Pescatore and A. O'Keeffe (Presidents of Chambers), G. Bosco, T. Koopmans, O. Due and K. Bahlmann, Judges, Advocate General: Sir Gordon Slynn Registrar: P. Heim
gives the following
JUDGMENT
Facts and Issues
The facts of the case, the course of the procedure and the conclusions, submissions and arguments of the parties may be summarized as follows :
I — Facts and written procedure
This dispute relates to structural measures in the hop sector and in particular to the manner in which the provisions of Regulation (EEC) No 1696/71 of the Council of 26 July 1971 on the common organization of the market in hops (Official Journal, English Special Edition 1971 (II), p. 634) and of Council Regulation (EEC) No 2253/77 of 11 October 1977 on structural measures in the hop sector (Official Journal 1977, L 261, p. 1) have been applied.
Regulation No 1696/71, which temporarily prohibits any increase in the areas planted with hops, provides for the payment of aid to recognized producer groups for conversion to other varieties and for the reorganization of hop gardens. The detailed provisions for the grant of such aid are contained in Regulation No 2253/77, Article 3 of which provides that aid for conversion to other varieties and for reorganization of hop gardens is to be granted to recognized producer groups on presentation to the authorities appointed by the Member States of a plan entailing at least a 40% reduction in the total area registered as at 30 June 1977 to which the plan applies. Article 4 of that regulation states:
“For a period of three years following implementation of the plan to convert to other varieties or to reorganize hop gardens, a recognized producer group may not plant with hops an area greater than that resulting from the application of that plan.”
In the Federal Republic of Germany the Minister of Agriculture for the Land of Bavaria issued directives for the application of those provisions with the requirements to be fulfilled and the procedure for obtaining the aid. Those directives dated 25 January 1978 include, inter alia, Paragraph 2.6 which states as follows:
“For a period of three years following implementation of these plans the recognized producer group shall not plant hops of an acreage greater than that provided for in the plans. Furthermore, during that period no hops shall be replanted in the area from which hops have been grubbed up.”
Subsequently, by letter of 5 December 1978, the Bavarian Minister for Agriculture informed the recognized producer groups in question that Paragraph 2.6 of those directives was to be supplemented as follows:
“An organization which is involved in one of the three steps for which aid may be granted shall not extend the area under hops after the plan has been implemented for a period of three years after such implementation. That period shall begin to run on the implementation of the plan relating to the organization in question.”
The letter recalls that, by virtue of Article 4 of Regulation No 2253/77, a recognized producer group may not plant with hops an area greater than that resulting from the application of the plan provided for in Article 3 (1) for a period of three years following implementation of the plan for conversion to other varieties or for reorganization of hop gardens. The letter therefore concludes that that plan relates only to areas which have been the subject of a request for aid for conversion to other varieties, for reorganization of hop gardens or for grubbing up hops.
Thus the actual objectives of the structural measures in the hop sector require that organizations which have received aid in the context of such measures shall not extend their area under hops during that period of three years.
By a letter of 21 December 1979, the Commission drew the attention of the Government of the Federal Republic of Germany to the fact that the government of the Land of Bavaria was interpreting the provisions of Community law with regard to the aid in question in the sense that they give rise to obligations only for hop growers, in their capacity as members of a recognized producer group, who have actually participated in a reorganization plan of that group. The consequence of such an interpretation would be that hop growers would be able to extend their area prior to the effluxion of the period of three years provided by Article 4 of Regulation No 2253/77 although they were members of a recognized producer group which had effected a reorganization plan. As the Commission considered that the obligations arising from that regulation, in particular the prohibition of any increase in the area planted with hops, applied to recognized producer groups as such, it requested the German authorities to take the necessary steps to prevent the planned increases from taking place.
By letter dated 4 February 1980, the Government of the Federal Republic of Germany disputed the interpretation given by the Commission to Article 4 of Regulation No 2253/77. In its opinion the prohibition contained in Article 4 can be applied only to those members of a producer group who have actually participated in a reorganization plan.
By letter dated 14 May 1980 the Commission requested the Government of the Federal Republic of Germany under the first paragraph of Article 169 of the Treaty to submit its observations on the Commission's opinion that the implementing directives issued by the Bavarian authorities were incompatible with Article 4 of Regulation No 2253/77.
In its reply dated 19 June 1980 the German Government maintained in full the position it had adopted in its letter of 4 February 1980.
On 8 April 1981 the Commission delivered its reasoned opinion under the first paragraph of Article 169 of the Treaty to the German Government. The government was requested to take the necesary measures to comply with the reasoned opinion within one month.
By a letter of 2 June 1981 the German Government informed the Commission that it continued to hold the opinion it had expressed in its letters of 4 February and 19 June 1980.
Since the Commission considered that the Bavarian directives of 25 January 1978, and in particular Paragraph 2.6 thereof as amended on 5 December 1978 were incompatible with Article 4 of Regulation No 2253/77, it brought this action before the Court under the second paragraph of Article 169 of the Treaty. The Commission's application was lodged at the Court Registry on 25 March 1982.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. It nevertheless requested the Commission to produce a document prior to the hearing.
II — Conclusions of the parties
The Commission of the European Communities claims that the Court should:
1) Declare that the Federal Republic of Germany, by not ensuring that the prohibition, contained in Article 4 of Council Regulation No 2253/77 of 11 October 1977, of any increase in the areas planted with hops was observed by the recognized producer groups, as such, in the event of the grant of aids, has failed to fulfil its obligations under the EEC Treaty;
2) Order the Federal Republic of Germany to pay the costs.
The Government of the Federal Republic of Germany contends that the Court should:
1) Dismiss the application;
2) Order the applicant to pay the costs.
III — Submissions and arguments of the parties
The applicant, the Commission of the European Communities, explains that the problem to which the present case relates is above all the interpretation of Article 4 of Regulation No 2253/77. It states that the German authorities were, at least in the beginning, at one with the Commission, inasmuch as the wording of the implementing directives made it clear that the duty not to plant was imposed upon the producer groups, and it was only the supplementary Bavarian provision dated 5 December 1978 which applied to producers individually.
As a result of that supplementary provision members of a producer group who did not take part personally in the structural measures of their group are free to extend their areas planted with hops prior to the effluxion of the period of three years provided for in Article 4 even though it was the producer group of which they were members which drew up the reorganization plan. For that reason the Commission considered that supplementary provision to be incompatible with Article 4 of Regulation No 2253/77.
In support of its argument the Commission submits first that the consequences arising from the contested circular are contrary to the literal wording of Article 4 and to the objectives which led to its adoption. According to the wording of Article 4 the prohibition of any increase in the areas planted with hops is expressly directed at producer groups, as such, and not at individual producers. A literal interpretation of that article accords with the objectives of the aid system, which is not simply to pay a grubbing-up grant but is to encourage producer groups to produce plans themselves and thus to assume obligations in return for the aid.
To the extent to which the members oi: a producer group who have not taken part in the plan are permitted the freedom to extend the areas under hops that objective is not observed. In that connection the Commission remarks that the interpretation of Article 4 of Regulation No 2253/77 advocated and put into practice by the defendant has effectively prevented the system of aids from attaining its purpose. After examining the trends in the areas planted with hops in the Federal Republic of Germany the Commission has concluded that had Community law been applied correctly the total areas under hops in Bavaria in 1980 would have been approximately 745 hectares below the figure for 1977 as a result of the grant of aid to producer groups (Annex IX to its application). Since that does not seem to be the actual position the Commission therefore considers itself justified in believing that new planting has in part compensated for the grubbing-up which took place during that period.
Next the Commission emphasizes the importance which it attaches to the role of producer groups in achieving the objectives of the common organization of the market in hops. In fact it is for such groups to submit reorganization plans to the competent authorities of the Member States and to distribute the aid which they receive; equally it is at them that the prohibition, contained in Article 4 of Regulation No 2253/77, of any increase in the areas planted with hops is directed. Thus the scheme and structure of the regulations adopted in the hop sector permit the formulation of an important rule according to which the provisions of Community law in relation to recognized producer groups apply to them, as such, without making any distinction between members of those groups. There is no reason to regard Article 4 of Regulation No 2253/77 as amounting to a derogation from that rule.
The Government of the Federal Republic of Germany, the defendant, considers that the wording of Article 4 of that regulation is not very clear and that the drafting is somewhat infelicitous. It still contends, however, that the opinion expressed by the Commission cannot be reconciled with the words of the provision themselves or with the factual and consistent link which exists between Articles 3 and 4 of that regulation. The defendant states first that the prohibition of any increase in the areas planted with hops, as expressed in Article 4, relates directly to the “area covered by the plan” and therefore can relate only to the areas cultivated by. the members of the producer groups who participated in the plan and were granted aid as a result thereof.
Secondly the defendant remarks that Article 3 of Regulation No 2253/77 which relates, inter alia, to the presentation by a producer group of a plan for the reorganization of hop gardens, does not imply the reduction of 40% of the total area cultivated by that group. It is sufficient, as the Commission has expressly recognized, if a part of the members of the producer groups participate in the plan so that the “area covered by the plan” in relation to which Article 3 imposes an obligation to reduce it by 40%, can only relate to part of the total area cultivated by that producer group. Since both provisions, namely Articles 3 and 4, refer without any doubt to the same plan, it appears to the defendant inconceivable that the expression “area covered by the plan” could have one meaning in Article 3 and a different one in Article 4.
The Government of the Federal Republic of Germany next contends that the Commission's argument conflicts with the purpose of Article 4 as expressly defined by the Community legislature. In that connection it refers to the recital in the preamble to the regulation relating to Article 4, which states as follows:
“... to ensure that the aid provided for in Article 9 (3) of Regulation (EEC) No 1696/71 is economically effective, it is necessary to provide that areas on which grubbing operations are carried out shall not be re-planted with hops for a period of three years.”
The defendant emphasizes that according to that wording Article 4 must relate solely to areas on which grubbing operations are carried out amounting to 40% of the areas covered by the plan. As regards the purpose of Article 4 it adds that, if the Commission's argument were correct, practically no producer group would be able to fulfil the requirements laid down for the receipt of, a id since participation in the structural measures-is voluntary and experience has shown that, in general, only some of the members can be persuaded by means of aids to reduce their areas under cultivation.
Furthermore, the defendant puts forward an historical argument: in the original proposal submitted by the Commission, which eventually led to Regulation No 2253/77, Article 3 did not refer, to 40% of the total area “to which the plan applies”, but to 40% of the area “of each producer who is a member of the group”. The German delegation suggested that that wording be changed precisely in order to clarify the fact that the reorganization plan does not necessarily cover all the land belonging to the members of the group. Once Article 3 was amended so that the areas covered by the plan no longer coincided with the total area of the producer group, it was clear that, in the mind of Community legislature, the prohibition, contained in Articled, of any-increase in the area planted with hops could only relate to the areas planted by those members of a group who actually participated in the plan.
Finally the Government of the Federal Republic of Germany claims that the system of aids in question is part of a system to which other sectors of the common agricultural policy have had recourse, namely a system of subsidies for the cessation of certain activity (subsidies for the slaughter of cows and the like). As a general rule such a system is based on respect for commercial freedom; the Community opted in favour of the commercial freedom of the producer who is completely free to choose not to contribute to the cessation of the activities in question, but in that case he may not claim to benefit from the aid system. It is the same in the hop sector; no grower may be forced not to increase his areas under cultivation but if he does he must renounce the right to participate in the plan drawn up by the group to which he belongs and the benefit of the Community aid corresponding to that participation.
If it were otherwise the system would, furthermore, be such as to give rise to objections of a constitutional nature: an extension of the restrictions relating to planting to hop growers who had neither participated in a plan nor benefited from aid would actually have to be regarded as an infringement of the right to property. Finally the German Government explains that a producer group may neither force its members to participate in a reorganization plan nor impose on the majority of its members, against their will and without compensation, any restriction on their enjoyment of their areas.
In its reply the Commission insists that only its interpretation of Article 4 of Regulation No 2253/77 is in conformity with the wording of that article and with the purpose of the system of aids.
The Commission observes first that the expression “area covered by the plan”, used by the defendant, does not appear in either of two provisions which it cites. It adds that a comparison of the wording of the two provisions by no means allows of the conclusion that the same expression is used in both of them. In the Commission's opinion Article 3 relates to the area dealt with in the plan as presented, whilst Article 4 relates to the area planted in hops remaining to the producer group after the plan has been carried out as the group's cultivated area.
As regards the significance of the recital referred to by the defendant the Commission states that the wording of a recital does not suffice to give to the actual provisions of a regulation an interpretation which is not consistent with their wording. In its opinion it is the substantive part of a regulation which has binding effect.
The Commission emphasizes the difference between structural aids in the hop sector and other subsidies granted for the purpose of reducing productive capacity. The defendant has compared the two systems and concluded that the obligation to reduce capacity is always imposed only on those producers who apply for aid. However, the Commission considers that comparison to be unconvincing. First, it states that the purpose of the system of aids in the hop sector is not solely the reduction of capacity but equally the adoption of structural measures improving production. Secondly, the comparison has no probative value since in the other systems aid is granted not to a producer group within the framework of a plan presented by that group but to individual producers carrying out specific projects on an individual basis. In the latter case the only purpose of the aid is to ensure that the cessation of the activity is not rendered illusory once the aid has been received by a resumption of the activity. The Commission claims that that system was consciously rejected in the hop sector. In that sector producer groups have a particularly decisive role to play. Regulation No 1696/71 provided that those groups must be formed, in particular, for the purpose of “joint adaptation of their production to the requirements of the market” and “improvement of production by changing to different varieties and by the reorganization of hop gardens” (Article 7 (1) (a) and (b)). It is therefore logical that the system of aids set up to perform that task should be closely linked with the producer group; in other words: that system does not relate exclusively to the activities carried out by individual producers. Thus it is the producer group which draws up the plan and, of its own motion, abides by the obligations arising from Article 4 of Regulation No 2253/77.
Next the Commission contests the defendant's argument to the effect that a minority of producers participating directly in the reorganization plan cannot impose on the majority economic sacrifices in the form of a prohibition without compensation of an increase in the area planted with hops. The Commission states that the obligations of a producer group are fixed by the articles of association of that group. In that connection the Commission cites the articles of association of the Hopfenverwertungsgenossenschaft Hallertau eG, the most important hop-producer group in Bavaria and in the Federal Republic of Germany. In that producer group reorganization plans are adopted by a simple majority vote so that no plan within the meaning of Articles 3 and 4 of Regulation No 2253/77 may be adopted without the agreement of a majority of the members. Furthermore, the Commission points out that all the members of the producer group benefit from an improvement in supply resulting from the implementation of such a plan. Consequently it is not true to say that the majority of the members of a producer group may only expect disadvantages (namely the prohibition of any increase in the cultivated area) from the implementation of a plan.
Finally the Commission notes that the defendant has not contested the argument that the interpretation of Article 4 of Regulation No 2253/77, as put into practice by the defendant, has prevented the system of aids from achieving its purpose since the grubbing up which took place was partly offset by new planting resulting specifically in a deficit of approximately 745 hectares.
In its rejoinder the Government of the Federal Republic of Germany repeats, in essence, the argument that the Commission cannot in any case rely on the wording of Article 4 of Regulation No 2253/77. It adds that the Commission's point of view mistakes the logical link between Articles 3 and 4. Futhermore, the defendant emphasizes that the Commission does not attach any importance in its reply to the recital in the preamble relating to Article 4 from which it is quite clear that the Council did not intend the prohibition of any increase in the area under hops to apply to the total area of the producer group.
Equally the Commission continues to fail to appreciate the logical coherence of the whole corpus of rules in the hop sector; if its view, which would result in a general cessation of planting, were correct, there would be no explanation for the fact that the Council did not simply extend the prohibition of planting which had been in force until the end of 1979. By moving to a system of voluntary restrictions of capacity linked to the grant of aids, the intention of the Council was precisely to bring to an end the operation of the general prohibition of any extension of the areas under cultivation.
As regards the tasks of recognized producer groups, to which the Commission seems to attach much importance, the defendant observes that it disputes the relevance of that argument. It follows clearly from Article 6 (1) of Regulation No 2253/77 that aid for the reorganization of hop gardens is to be paid to individual producers on the basis of actual expenditure on plants and materials. It is true that producer groups have important administrative functions since it is through their intermediary that the plan must be presented and since it is the groups which receive the aid for subsequent distribution. Nevertheless, they cannot be said to be in any way the persons for whom the aid is intended but only intermediaries.
Next the defendant states that in the Federal Republic of Germany producers having cultivated areas in excess of 5000 hectares took part in reorganization plans within the meaning of Article 3. Those areas are subject in their entirety to the prohibition of any increase, contained in Article 4; they were reduced by 2024 hectares by grubbing up. The Commission's objection that the purpose of the aid system was not achieved because other producers extended their cultivated areas (by approximately 740 hectares only) is not correct; in fact the general prohibition of any increase in the areas planted as stated by the Commission in no way corresponds to the purposes of the aids.
Finally, the defendant contends that the Commission places too little weight on the argument concerning infringement of fundamental rights. It follows from the reply that the Commission is in favour of discriminatory treatment of hop growers. If the restrictions on the enjoyment of property rights were to be imposed on growers who receive the aid in question as well as on growers whose only gain is the improvement in supply of hops, the Community system would amount to a wide-spread infringement of property rights. That system, in fact, imposes a special sacrifice on certain hop growers and one which, in the absence of any compensation or indemnification, manifestly infringes the basic right to the peaceful enjoyment of property.
IV — Oral procedure
At the sitting on 1 February 1983 the parties presented oral argument.
The Advocate General delivered his opinion at the sitting on 10 March 1983.
Decision
1. By application lodged at the Court Registry on 25 March 1982, the Commission of the European Communities brought an action under Article 169 or the EEC Treaty for a declaration that the Federal Republic of Germany, by not ensuring that the prohibition, contained in. Article 4 of Council Regulation (EEC) No 2253/77 of 11 October 1977 on structural measures in the hop sector (Official Journal 1977, L 261, p. 1), of any increase in the areas planted with hops was observed by the producer groups, as such, in the event of the grant of aids, has failed to fulfil its obligations under the Treaty.
2. Regulation No 2253/77 lays down the detailed rules for the application of Articles 8 and 9 of Regulation (EEC) No 1696/71 of the Council of 26 July 1971 on the common organization of the market in hops (Official Journal, English Special Edition 1971 (II), p. 634). Article 8 relates to the grant of aid to recognized producer groups to encourage their formation and to facilitate their operation. Article 9 relates to the grant of aid to producer groups for operations to be used for changing to different varieties and for reorganizing hop gardens.
3. Article 9 of Regulation No 1696/71 was amended by Council Regulation (EEC) No 1170/77 of 17 May 1977 (Official Journal 1977, L 137, p. 7). Paragraph (3) thereof, in its amended form, provides that the Member States may grant to recognized producer groups aid for conversion to other varieties and the reorganization of hop gardens, provided that such operations entail a reduction of at least 40 % in the area concerned.
4. The concept of a “producer group” is defined in Article 7 of Regulation No 1696/71, as amended by Regulation No 1170/77. According to that definition a producer group consists exclusively or mainly of hop producers formed on the initiative of the producers for a number of hop production and marketing purposes including “adapting such production jointly to the requirements of the market and improving the product by converting to other varieties and by reorganizing hop gardens”. The other objectives include the promotion of rationalization and mechanization of cultivation and harvesting operations and the adoption of common rules for the production and marketing of all the produce of the members.
5. According to Article 7 a producer group, is to be recognized by the Member States if it fulfils certain general conditions, in particular the condition that it applies common rules for production and placing on the market. According to Commission Regulation No 2564/77 of 22 November 1977 (Official Journal L 299, p. 9) those common rules are to comprise inter alia, rules relating to the use of one or more specified varieties when renewing plantations or creating new ones, to compliance with certain methods of cultivation, to harvesting and drying and rules relating to the quantities which the producers are authorized to sell themselves and the rules governing such sales.
6. In substance this dispute relates to the consequences of the grant of aid for conversion to other varieties and for reorganization of hop gardens provided for in Article 9 of Regulation No 1696/71, as granted to recognized producer groups.
7. Regulation No 2253/77 provides first, in Article 3, that such aid is to be granted on presentation to the authorities appointed by the Member States of a plan for conversion to other varieties and for the reorganization of hop gardens “which entails at least a 40 % reduction in the total area registered as at 30 June 1977 to which the plan applies”.
8. The regulation goes on to provide, in Article 4, that “for a period of three years following implementation of the plan to convert to other varieties or to reorganize hop gardens, a recognized producer group may not plant with hops an area greater that that resulting from the application of that plan”.
9. The Commission is of the opinion that the prohibition, contained in Article 4 of Regulation No 2253/77, of any increase in the areas planted with hops applies to a producer group, as such, where that group has presented the plan relating to structural measures for the purpose of obtaining aid. Since the prohibition contained in Article 4 has that general application no member of the producer group has the right to extend his area planted with hops during the three years following the implementation of the plan.
10. After establishing that the directives by which the Minister for Agriculture of the Land of Bavaria instructed recognized groups in Bavaria as to their obligations arising from the implementation of a conversion and reorganization plan were not in compliance with the prohibition contained in Article 4, interpreted as aforesaid, the Commission entered into correspondence with the Government of the Federal Republic of Germany which, however, disputed the Commission's interpretation of Article 4.
11. In fact the German Government contended that it followed from Article 3 of Regulation No 2253/77, according to which the conversion and reorganization plan was to entail at least a 40 % reduction in the total area “to which the plan applies”, that the plan did not necessarily relate to the total area planted with hops of the producers who were members of the group. Those producers whose land was not involved in the plan and who therefore did not qualify for aid by virtue of Article 6 (2) of Regulation No 2253/77 were not bound by the obligations flowing from the implementation of the plan according to Article 4 of the regulation.
12. In the course of the correspondence and discussions between the relevant officers of the Commission and the German Government it was not possible to eliminate the differences of opinion as to the interpretation of the provision and the Commission therefore brought these proceedings.
13. The dispute between the parties concerns first the wording of the provision at issue. In the Commission's view the wording of Article 4, according to which for a period of three years following implementation of the plan “a recognized producer group may not plant with hops an area greater than that resulting from the application of the plan”, clearly expresses the rule that the prohibition of an increase in the area planted applies to the group, as such, and not to the individual producers who have implemented the structural measures in question.
14. The German Government is of the opinion, on the other hand, that the prohibition, contained in Article 4, of any increase in the area planted must have the same scope as the reduction in the area planted contained in Article 3, which refers to a part of “the total area ... to which the plan applies” and therefore relates only to producers whose land is involved in the plan.
15. In addition the Commission cites the objectives of the system of aids for conversion and reorganization. The purpose of that system, which was established to deal with marketing difficulties which had arisen in the hop market, was to combine an improvement in the quality of production with a substantial reduction in converted acreage in order to achieve a balance between supply and demand. The requirement contained in Article 9 of Regulation No 1696/71 of a reduction of at least 40 % in the area concerned loses all meaning if it is possible to compensate for that reduction by an increase in the area planted with hops by the members of the producer group who have not participated directly in the reorganization.
16. The German Government maintains that the purpose of the system of aids is to encourage the voluntary cooperation of the producers in putting structural measures into effect. Such systems, which also include premiums for the slaughter of dairy cows and subsidies for the destruction of inland waterway vessels, do not restrict the commercial freedom of those producers who do not receive Community aid.
17. In order to determine the scope of Article 4 of Regulation No 2253/77, the interpretation of which is in dispute, it is necessary to consider the purpose of the system of aids for conversion and reorganization within the context of the whole organization of the market in hops as modified by Regulation No 1170/77.
18. The recitals in the preamble to Regulation No 1170/77 state that since the implementation of the common organization of the market in hops in 1971, the situation in that market has changed radically as shown by the imbalance between supply and demand which has led to a slump in prices. That imbalance is the result partly of an excessive increase in the area under hops, particularly of certain varieties, and partly of the use of smaller quantities of hops in the manufacture of beer.
19. The recitals emphasize that in order to achieve a balance between supply and demand hop producers should combine and form producer groups which would be more capable of having an impact on production policy and on the management of supply. Likewise the qualitative adjustment of production to market trends should be pursued by continuing the grant of aid for conversion to other varieties and the reorganization of hop gardens, but the grant of that aid should be subject to a substantial reduction in the area converted.
20. The arguments submitted by the German Government are not compatible with the abovementioned purposes of the amendments made in 1977.
21. First, those arguments are based on the idea that aid is granted to individual producers, that only those individual producers who receive aid are intended to be affected by the prohibition of any increase in the area under hops and that the producer group's only function is to act as an office for making payments. In that connection it should be noted that the aim of the 1977 rules is precisely to allow producer groups, to which the aid in question is granted by virtue of Article 9 (3) of Regulation No 1696/71, to contribute to achieving a balance on the market by exerting an influence inter alia on supply and demand.
22. Secondly, the arguments of the German Government would have the effect of allowing producers who have combined in a producer group to carry out grubbing-up operations on the land of some of them and of receiving the corresponding Community aid whilst at the same time allowing an increase in the area planted with hops belonging to other members of the same group. Such a situation would be manifestly contrary to one of the principal objectives of the 1977 rules, which is to reduce the supply of hops by restricting the total area planted.
23. Consequently, Article 4 of Regulation No 2253/77 must be interpreted as meaning that the prohibition therein contained of an increase in the area planted with hops applies to all the producers who are members of the recognized producer group receiving the aid, whether or not those members are individually concerned with the structural measures in question.
24. The German Government also contends that such an interpretation of Article 4 of Regulation No 2253/77 infringes a fundamental right, namely the right to property, since those producers who have neither taken part in the implementation of the structural measures nor have received the corresponding aid are nevertheless under an obligation not to increase their areas under hops.
25. That argument, however, is based on a misconception as to the position occupied by the producer group within the framework of the Community rules in the hop sector. It is for the competent bodies within the producer group to decide whether or not it is appropriate to undertake the subsidized operations of conversion and reorganization and who thus bind the group and the whole of its members to bear the corresponding burdens. The individual producer is bound by such decisions as he is by any other decision validly taken by those bodies under the general rules governing associations of persons.
26. It follows from the foregoing considerations that the Federal Republic of Germany, by not ensuring that the prohibition, contained in Article 4 of Regulation No 2253/77, of any increase in the areas planted with hops was observed by the producer groups established within its territory, in the event of the grant of aids for conversion to other varieties and for reorganization of hop gardens, has failed to fulfil its obligations under the EEC Treaty.
Costs
27. Under Article 69 (2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs. Since the defendant has failed in its submissions, it must be ordered to pay the costs.
On those grounds, THE COURT hereby:
1 Declares that the Federal Republic of Germany by not ensuring that the prohibition contained in Article 4 of Council Regulation No 2253/77 of 11 October 1977, of any increase in the areas planted with hops was observed by the producer groups established within its territory, in the event of the grant of aids for conversion to other varieties and for reorganization of hop gardens, has failed to fulfil its obligations under the EEC Treaty;
2 Orders the defendant to pay the costs.